After breaking out of an ascending triangle that we identified on Monday and pulling back to the Fibonacci retracement levels that we were watching on Tuesday, price promptly formed yet another ascending triangle when it failed to move past resistance at the 1.5100 major psychological level a couple of times. As an ascending triangle, our main directional bias is to the upside, and the moving averages are confirming our directional bias since they have already crossed-over into uptrend mode. As for stochastic, it’s already indicating potentially overbought conditions, but it’s still pointing up, so forex traders who are bullish on the pair may not be exhausted yet and a potential breakout may occur sooner or later. The triangle is kinda small, though, so expect only around 150 pips if the pattern does break.
EUR/GBP surged ever higher until it got violently rejected at the 0.7400 major psychological level. The pair then tried a second offensive, but got repelled again. After that, most forex traders who have been bullish on the pair apparently said “I give up” and left, allowing the sellers to push EUR/GBP lower. There were enough buyers left to fight a losing battle against the sellers, however, forming this nifty descending channel in the process. As y’all know by now, the most conservative way to play a descending channel is to look for resistance near the top of the channel, and that’s exactly where price is currently at. The moving averages have also crossed-over into downtrend mode, with the 200 SMA acting as dynamic resistance. Stochastic has also left the overbought region and making its way back down, indicating that forex traders bearish on the pair may be taking over already.
The 2.2100 major psychological level appears to be well-defended by forex traders who are bearish on GBP/AUD, but the bulls’ offensive is relentless since price has been making higher lows or troughs. As such, a rather massive ascending channel has formed on GBP/AUD’s 1-hour forex chart. The moving averages are oscillating, so they’re not really helping much, but the overall trend is still up and an ascending triangle is considered a bullish forex chart pattern, so our main directional bias is therefore also to the upside. Stochastic is currently pointing down and moving away from the overbought area, though, so an upside breakout may not be forthcoming just yet. In any case, if the pattern does break, then price could move higher for around 800 pips since that is roughly the height of the triangle. As usual, make sure to practice proper risk management should you find a trade based on this or any of the other charts.
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To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis. Lucky for us, Pip Diddy fills us in on what we need to know about fundamentals with his Daily Forex Fundamentals.AUD/CAD 1-hour Forex Chart